• The FBM KLCI underwent a consolidation yesterday after its recent runup was beginning to look tired. Still, the consolidation was mild as there were pockets of support on some of the index heavyweights. Most other Bursa Malaysia indices saw little movement with the Technology index (+0.9%) the big mover, while the trading/services index was the main underperformer, shedding 0.1% for the day.

• Market interest continues to thin with the traded volumes continuing to dip to 3.45 bln shares for the day, down from 3.55 bln shares a day earlier amid the lack of fresh leads. However, gainers and losers were dead even at 448 stocks a side.

• The main index losers were Genting Malaysia (-19.0 sen) and Genting (-13.0 sen), followed by BAT (-RM1.00) and Public Bank (-16.0 sen). In the broader market, the main underperformers include Scientex (-31.0 sen), Dutch Lady (-24.0 sen), Bintulu Port (-20.0 sen) and MPI (-18.0 sen) – the latter retreating after its recent gains.

• On the other side of the trade, the big movers were Panasonic Malaysia (+50.0 sen), Vitrox (+39.0 sen), Ajinomoto (+28.0 sen) and Allianz (+20.0 sen). Among the lower liners, PUC was up 0.5 sen after it confirmed its acquisition of a Singapore based company, while Yinson climbed 11.0 sen with a new FSPO contract award worth US$1.0 bln. On the big board, the main gainers were Petronas Gas (+34.0 sen), Maybank (+6.0 sen) and IHH (+6.0 sen).

• Despite the scant details of the proposed U.S income tax cut, regional indices closed broadly higher with the Shanghai Composite (0.4%) continuing to take small strides, while the Hang Seng was 0.5% higher. The Nikkei, however, slipped 0.2% and ending a winning streak of five days after the BOJ reiterated its stimulus measures and inflation remaining benign. Most ASEAN indices also ended the day in the red.

• There were little movement on U.S. stocks as market players await for more details on the proposed income tax cuts, leaving the Dow and S&P 500 to drift before ending the day with minute gains. The Nasdaq, however, chalked up another new high on the back of strong results from several technology bellwethers like Amazon and Alphabet Inc.

• European stocks, however, succumbed to profit taking activities after their recent gains with the FTSE (-0.7%) down the most as the U.K’s consumer confidence fell to a new low following the Brexit decision, while the DAX and CAC slid 0.2% and 0.3% respectively with banks like Deutsche Bank leading the decline.

The Day Ahead

• With fewer leads, we think the Malaysian stock market is likely to veer to a sideway trend ahead of the long Labour Day weekend. We also see market interest thinning as new leads are needed to provide the market with a new lift after the unveiling of President Trump’s proposed income tax cuts failed to excite the markets.

• As it is, the 1,767 level continues to serve as the main near term resistance, but we expect the key index to range between the 1,760-1,770 levels over the near term, thus keeping the FBM KLCI near the above near term resistance.

• We also think that the lower liners and broader market shares could see reduced following ahead of the long weekend and traded volumes are likely to thin further. COMPANY UPDATE • Engtex Group Bhd’s orderbook grew to RM170.0 mln as at 31st March, 2017, after the company has been awarded five pipe supply contracts worth RM60.0 mln in the first quarter of 2017. • Most of the contracts are set to be recognised in 2017. The group is currently tendering for more than RM300.0 mln worth of projects nationwide. (The Star Online)

Comments

• The award of the above contracts is above our orderbook replenishment assumption of RM150 mln and will also provide earnings visibility for 2H2017. The inclusion of the new contracts is also expected to lift its net EPS forecast by 3.5% for 2017 to 26.2 sen, but there is no change to our 2018 net EPS forecast of 28.2 sen as the new contacts are expected to be fully recognised in 2017.

• Despite the inclusion of the new contracts, we maintain our HOLD recommendation on Engtex with an unchanged target price of RM1.30 as the new contracts are relatively small. We arrived at our target price by ascribing an unchanged target PER of 8.0x to its manufacturing and wholesale business, while its property development segment’s valuation remains pegged at 0.6x its BV.

Company Briefs

• RHB Bank Bhd’s wholly-owned RHB Islamic Bank Bhd has issued a Sukuk with a face value of RM250.0 mln. The bonds will have a tenure of 10 years and noncallable for five years with a fixed profit rate of 4.88% per year, payable semiannually in arrears throughout the entire tenure.
   
• Funds raised from the sukuk will be used for RHB Islamic’s Shariah compliant working capital and general banking purposes. (The Edge Daily)

• Tenaga Nasional Bhd (TNB) reported a 12.0% Y.o.Y rise in its 2QFY17 net profit to RM1.48 bln, from RM1.32 bln in the previous year’s corresponding quarter, intandem with stronger revenue contribution, which grew 6.0% Y.o.Y to RM11.16 bln, from RM10.49 bln.

• Cumulative 1HFY17 net profit, however, slipped 2.0% Y.o.Y to RM3.22 bln vs. RM3.30 bln in 1HFY16, although cumulative revenue rose 6.0% Y.o.Y to RM22.40 bln, from RM21.17 bln. The lower earnings were attributed to higher finance costs and tax charges. The utility provider has also declared an interim single-tier dividend of 17.0 sen per share.

• The group noted that growth prospects is likely to be challenging moving forward, mainly due to higher global commodity and energy prices and the impact of exchange rate volatility. (The Edge Daily)

• T7 Global Bhd, (formerly known as Tanjung Offshore Bhd), has secured an extension of one-year for the provision of construction work request (CWR) worth about RM200.0 mln from Petronas Carigali Sdn Bhd, as well as a new two year contract from Sarawak Shell Bhd for the provision of professional manpower under an umbrella contract for RM15.0 mln.

• The latter comes with a one-year optional extension, commencing on 1st March 2017. (The Edge Daily)

• Vizione Holdings Bhd has been awarded a RM58.0 mln subcontract in a government housing project in Kelantan under the Program Perumahan Rakyat (PPR).The project will include the supply of materials, labour, necessary tools and equipment to build 418 units of low cost walk-up flats at the Machang district.

• The 30-month contract is estimated to cost RM55.3 mln, with a gross profit margin of about 4.7% and is expected to commence in 2Q2017. (The Edge Daily)

• Datasonic Group Bhd has clinched a RM40.8 mln contract for maintenance services at the National Registration Department’s (NRD) card personalisation centres.

• The group is also required furnish a performance bond of RM1.02 mln during the duration of the three-year contract, which ends on 30th April 2020. (The Edge Daily)

• Maxis Bhd‘s 1Q2017 net profit declined marginally by 2.5% Y.o.Y to RM505.0 mln, from RM518.0 mln – due to higher operating costs, although revenue improved to RM2.16 bln, from RM2.14 bln a year earlier. It also declared a taxfree dividend of five sen a share. (The Star Online)

• Westports Holdings Bhd's 1Q2017 net profit shed 17.6% Y.o.Y to RM140.9 mln, compared to RM171.1 mln last year, as the previous corresponding period’s earnings included a one-off disposal gain of RM20.4 mln and higher fuel cost. Quarterly revenue however, rose 12.0% Y.o.Y to RM520.9 mln, from RM464.7 mln in the same period last corresponding year. (The Star Online)

• Nestle (Malaysia) Bhd has earmarked RM200.0 mln as capital expenditure (capex) this year, compared with RM123.0 mln last year. The capex will fund the upgrading costs of its manufacturing facilities across all product categories. (The Star Online)

• Dutch Lady Milk Industries Bhd’s 1Q2017 net profit decreased 6.0% Y.o.Y to RM31.9 mln, from RM33.9 mln a year ago, dampened by higher material prices and investments in advertisements and promotion. Revenue for the quarter grew less than 1.0% to RM250.0 mln against RM249.8 mln previously.

• The group foresees another challenging year in view of the current inspid economic outlook, higher material prices and weak ringgit. (The Star Online)

• Ire-Tex Corp Bhd Independent Director Mak Lin Kum said the Extraordinary General Meeting (EGM) convened on 27th April 2017 for the removal of several directors of the company was invalid as its was riddled with unusual conduct.

• To recap, Elite Cosmo Group Ltd which holds about 16.3% equity stake in Ire Tex had called for the EGM on 11th April, 2017 for the immediate removal of Mak and directors Soo Tee Wei, Chin Wui Choong, Lee Yow Fui, Wong Fook Hiong. (The Edge Daily)

• PBA Holdings Bhd expects to reduce its RM91.0 mln domestic water subsidy in Penang, following the impending implementation of the water consumption surcharge (WCS) next year.

• PBA said the subsidy has increased from about RM50.0 mln in 2008 and that the yearly sum is not sustainable or sensible, as the money should be used for important water infrastructure projects to avoid water rationing. (The Edge Daily)

• Bursa Malaysia Securities has publicly reprimanded SMTrack Bhd for breaches of ACE Market listing requirements. SMTrack was late for a month in announcing a quarterly report as well as its 2016 annual report and failed to consult Bursa on the period covered in the quarterly report after changing its financial year end. (The Edge Daily)

• Scientex Bhd has proposed a private placement of up to 10.0% of its issued shares (about 46.4 mln shares) to third party investors to raise as much as RM361.6 mln for its property development, landbank expansion and as working capital for its manufacturing business.

• The expected proceeds from the placement are based on an indicative issue price of RM7.80 per placement share. (The Edge Daily)

• Rakuten Trade Sdn Bhd, a joint-venture between Kenanga Investment Bank Bhd (Kenanga IB) and Japan's Rakuten Securities Inc, has received a licence from the Securities Commission Malaysia (SC) to provide online brokerage services. (The Edge Daily)  

Source: Mplus Research - 28 Apr 2017